Bank Of America Is A Leading Economic Indicator

by Rory Cripps | October 16, 2009 at 06:33 pm

313 views | 22 Recommendations | 12 comments

Bank of America, one of the many "too big to fail" corporations, received $45 billion in taxpayer "bailout" money a while back if you recall.

Today, Bank Of America reported a $2.24 billion loss for the third quarter. But according to the New York Times, "Some of the red on the bank’s balance sheets actually reflected an improvement in its financial condition after the depths of last year."

The Bank Of America's loss represents a 26 cent decline per stock share from July through September.However, Wall Street "analysts" expected only a 12 cent per share decline. In other words, the "analysts" were off by over 100%. in their forecast.

I don't mean to upset anyone that has watched 40% to 50% of their their investment portfolio and retirement nest egg evaporate into thin air over the past two years, but I've just got to tell you this: the Wall Street "analysts", that were off the mark by over 100% in their analysis of the Bank Of America's third quarter earnings are joined at the hip with the "analysts" that you have entrusted with your investment portfolios throughout the years. And no matter how much you've lost, you can rest assured that those that manage your investment and retirement funds continue to make a profit while you continue to experience a loss.

I don't know what to make of America's current economic crisis. And it is a crisis! At last count, sixteen states are in the throes of double-digit unemployment rates. And a number of other states are running a close second in the high 9% range. Foreclosures, bankruptcies, and credit defaults are at record highs.

I think that Wall Street has sold the American people a bill of goods for way too long. My only hope is that the American people wake up before it's too late and realize that Wall Street together with the American banking industry, is a government sanctioned scam of major proportions.

Bank of America reported a third-quarter loss on Friday, releasing results that showed a bank burdened by credit card delinquencies and mortgage defaults.

The bank, which had big profits in the previous two quarters, reported a loss of $1 billion in the third quarter before accounting for dividends to preferred shareholders, in particular the federal government. When those dividend payments are included, the loss was $2.24 billion.

Some of the red on the bank’s balance sheets actually reflected an improvement in its financial condition after the depths of last year.

In a conference call to discuss the bank’s performance, its chief executive, Kenneth D. Lewis, struck an elegiac note. Mr. Lewis, under fire for the bank’s performance is stepping down at the end of the year.

Mr. Lewis said. “It’s been a pleasure to lead Bank of America and interact with all of you. I have no doubt that Bank of America will thrive and my absence will not slow the momentum that is starting once again to move forward.”

The loss of 26 cents a share for the three months from July through September compared with a profit of $3.2 billion, or 33 cents, in the second quarter. Wall Street analysts had been expecting a loss of 12 cents a share.

Loans at least 30 days overdue are still growing, the bank said in a federal filing earlier this week.

Bank of America has accepted some $45 billion in taxpayer bailouts since the financial crisis erupted last year.

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Karl Gotthardt - albertacowpoke

at 18:58 on October 16th, 2009

Rory, I think for those of you that have 401 Ks it's time to go elsewhere. I agree with PIM that the bubble which has been created by bail outs of the banks and subsequent borrowing by the Feds will burst.

Rory Cripps

at 19:33 on October 16th, 2009

ACP: I'm with you on that one 100%! I don't have a 401K and the investments that I do have are all in overseas markets and funds. At this point in time, I would urge Americans to put what little money they have into practical items such as canned foods, bullets, guns, farming implements and the like. Also into a few different currencies. I'm not being facetious here. What is occurring in America nowadays, socially and politically, is something that I've not experienced in my lifetime. I have no doubt that some serious stuff is going on and I'm beginning to put my finger on it as are other Americans. The Obama Administration had better work fast and furious 24/7 if it want's to effect the kind of "change" that it hopes to subject America to. There is something very unsettling going on with the Obama Administration. And I say this because I've never seen more indecision and political blunders on the part of an American president as I've seen with Obama. Obama's actions and non-actions indeed make me wonder . . . .

nanute

at 03:32 on October 17th, 2009

Personally, I sold my BOA stock at 37 and was told I was being foolish. When Ken Lewis bought Conutrywide Financial in 08' and followed that brillilant move with absorbing Merill Lynch I knew I had made a very wise investment decision. The board of directors at BOA have forced Lewis into "retirement" and under the terms of the bailout he won't get a salary this year.I can't express my outrage over the government attempting to control private sector salaries. I'm mortified, I tell ya'.

People have short attention spans, and even shorter memories. When the current administration and supporters of "taking over the too big to fail banks", started floating the idea, the ideologues started screaming about socialism and government taking over the "free market." Let the banks fail was the mantra. Allowing the larger financial institutions and other entities to fail all at once was not an option. (in my opinion)This "creative destruction", non-government intervention approach would have most likely caused another Great Depression from which the capitalist system might not have ever been able to recover from. Granted, this is speculation on my part. I don't know about you, but I'm not willing to take that risk of total collapse of the economy, are any of you?

45Billion in taxpayer dollars, and counting, later BOA and Citi are still in a position of vulnerability of not being able to survive without more taxpayer dollars. Should we cut em' loose and let em' fail, or should we put them into receivership and manage the fallout? This was the approach that was probably less costly to the system as a whole, and taxpayers in particular, from the beginning. But no, we can't have the government "taking over" the "free market." Pick your poison, or show me a better choice. Any talk of re-regulation is met by resistance by political forces that were adherents of deregulation and self regulation by business. That idea worked out brilliantly.

Attempts by the administration to put in place meaningful, beneficial rules to allow people in foreclosure to get a fair shot at recovering, were again resisted by the very forces that created the mess. Allowing bankruptcy judges to determine if the value of the outstanding mortgage should be reduced was resisted and removed from any meaningful reform put forth by the party in power. And the nightmare continues. The banks would rather foreclose, than work out a reasonable solution with people that have a reasonable shot at repaying the debt. And don't even try to argue that this is all the fault of the Community Reinvestment Act. Here's a little excerpt from Business Week on this score: The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”

And I say this because I've never seen more indecision and political blunders on the part of an American president as I've seen with Obama. What the f''ck! Jumping Jesus Christ on a Pogo Stick! The last dear leader has a pretty long list of blunders that I'd need another post to list. This new guy in in office 9 months and everything is his fault. Tell me what decisions or indecision's are we talking about here?

Babel-Fish

at 22:43 on October 16th, 2009

Lets remember the crisis was worst at its on sort, prior to when Obama took over the responsibility. The stimilus plan was initial involked to gain investors trust, the bailouts to help stop the biggest companies from folding and so that banks had money to loan. The tax money used was looked at as being an investment that it would earn money in interest.

It was stated that the money invested and spent was not enough to solve the total problem as with all elitist corrupt plans the boys thought they could abuse the system and many did and granted themselves nice bonuses.

Blunders by a US president? are they indeed do you really think that Obama is the economic whiz kid behind these plans initially these plans where in fact based on Gordon Browns ideas to stimulate the world economy. Equally Bush was prepared to do the same thing if he had been re-elected the plan was handed over to Obama of whom only adjusted whom else would be bailed out. I have been following this thing through thoughly from its on set as i have a non political view my analysis seems out of step with those that do.

Obama has the responsibilty yes but the plan is not his economics like this are not suggested normally by politicians that have no real clue about the higher field of economics. I keep on stating who was the guy that dreamed the solution up of whom is the only senior politician that has a real back ground and complete experience of world economics in fact he mastered it and was considered and still is considered as being a leader in the field of economics. Gordon Brown was talking about the plan way before it was introduced back in early 2009.

Obama can be blamed totally for the heath plan and also for not bringing the troops home ands the H1N1 flue scam. But unfortunatly nothing more than agree to something he has no real clue about. The stimilas plan was as I stated early to stimilate confidence in the market place so investers would invest. Only the choice of bailing out the automobile industry could be viewed as totally a Obama responsibily.

I dont like Obama much but I consider its fair to blame him for his own mistakes and not for those that others have made other than he agreed to carry a plan out. What else could he have done, something had to be done because the public expected to be done.

Rory Cripps

at 08:08 on October 17th, 2009

Babel: I agree with much of what you posted. This economic train wreck started long before President Obama entered the White House. You can see it all on any number of economic charts. But the bad economic news has increased dramatically under the Obama administration. There are almost twenty American states that are in the double-digit unemployment range. Michigan--with it's reliance on the auto industry--is above 15% unemployment, California, Oregon, and Rhode Island are 12%, Nevada is 13%, Kentucky and South Carolina are 11%., Florida, Alabama, North Carolina, Ohio, Tennessee, Georgia, and Illinois, are all 10%. And with rare exception, most of the other states are in the 8% to 9% range. To me, the Obama Administration appears to have too many things going on at once and it's not focusing on one of the biggest problems which is the continuing increase in the U.S.unemployment rate.

PIM of SPAIN

at 01:43 on October 17th, 2009

A good to the point analysis Rory, thanks for posting this one. At really is a wake up call for everyone. But the problem still boils down to the financial illiteracy of many people involved. Not enough can be alarmed about what is happening right now, specifically on Wall Street. It probably are couple of 'gangs' that fight each other as the newest Wall Street scandal story does confirm: "A leading US hedge fund boss and five other people have been arrested on charges linked to insider trading."Now wiretaps are used, why not on their own cronies? Look at the Madoff case for proof.

Rory Cripps

at 07:50 on October 17th, 2009

Thanks Pim! As you know, I'm not a fan of the Federal Reserve and I'm not a fan of Wall Street. With that said, I don't believe that the depression (using your term for the "
recession") is a failure of capitalism per se. I believe it to be a failure of the capitalists themselves. The government is inept and corrupt enough as it is. And the Wall Street crowd and many corporations are absolutely corrupt. And now what we have is a merging of both those corrupt entities to form an even more corrupt entity.

Hugh Askew

at 03:43 on October 17th, 2009

"I would urge Americans to put what little money they have into practical items such as canned foods, bullets, guns, farming implements and the like."

Rory, that makes you sound like one of them there gummit hatin' survivalists!! And, you should have added a wood burning stove to the list, along with TP. ;)

Personal survival aside, i tend to agree with Rory's assessment: "There is something very unsettling going on with the Obama Administration."

The appearance, from my perspective here in the hinterlands, is that an oligarchy has been created.

The oligarchy seems to consist of his administration, the Federal Reserve, the SEC, and the bail-out banks. The creation of that ruling group, was by, or with the consent of, the Obama administration.

Without sidetracking into political agendas, i'm not sure how else to explain the intertwined crisis/action/reaction sequence that has occurred. As proles subject to their whims, our sustenance has become dependent upon them. We have been sold, as it were, to our creditors.

Rory Cripps

at 07:41 on October 17th, 2009

Hugh: Thanks for your comment! It does make me sound like one of them there gummit hatin' survivalists doesn't it? HA! But believe me, I'd much rather have a roof over my head, an HDTV, and be surrounded by modern conveniences and love my gummit as much as my gummit loves me! We've got a major major unemployment problem here in America and on the face of it, it looks like the Obama Administration is doing absolutely nothing about it. I know that the private sector is what stems job growth, but at this point, someone needs to come up with a coherent economic plan to get Americans back in the work force. At the risk of sounding paranoid and conspiracy minded, I'm incredulous that the Obama Administration appears to be in a state of utter paralysis. That may not be the case at all. One of my theories is that the Obama Administration has a dilemma on it's hands when it come to policies. In other words, the administration knows the specific policies which have to be put into effect, however it's reluctant to do so, because those policies would alienate the administration's core base of political supporters.

nanute

at 08:24 on October 17th, 2009

Rory,

I honestly share your frustrations. All that one needs to do is look a bit closer at what is the main causes of the perceived paralysis are(is). Let's take the unemployment case first: The Democratic Party majority in the House passed an extension of unemployment benefits within the past week or so. The Senate with a bare majority, and arcane procedural rules, attempted to fast track this legislation. The Republican led minority put a hold on the bill, in an attempt to do what? The rhetoric is that more time is needed to study the bill. There is a "cost" concern issue. In the meantime, people whose benefits have expired will just have to wait, fall behind on the mortgage, credit cards, medical bills, or whatever else might be accumulating. These unfortunate Americans will just have to pay the cost indirectly. (Republicans good, Democrats bad!) lol

One of my theories is that the Obama Administration has a dilemma on it's hands when it comes to specific polices......it's reluctant to do so, because those policies would alienate the aministration's core base of supporters. Is it safe to assume you are talking about the "left of center progressives/liberals? " That constituency supports health care reform, unemployment insurance relief, more stimulus spending and a host of other programs that would relieve the burden being faced by people that have none of these "luxuries." The president has already indicated that he is likely to discount this constituency by way of his flexibility on the public option health care debate.

It is all a political game to people on both sides of the aisle, that are insulated from who "wins and who loses." The problem(s) Obama is facing are multi-dimensional and nuanced. Democrats have a party that is made up of progressives, moderates and conservatives. (Blue Dogs.) Getting them all to agree is difficult at best. The leader in the Senate, in my opinion, is a spineless jellyfish." Say what you like about the Republican's, one thing is for certain, if a member steps out of line or doesn't toe the party line, he gets his political balls cut off.

If I misjudged which core constituency you were referring to, please set me straight. With upmost respect. nanute the rube.

PIM of SPAIN

at 09:07 on October 17th, 2009

Rory very well worded "a merging of both those corrupt entities to form an even more corrupt entity." And don't forget the financial illiteracy of the people in charge. That creates even more ineptness on top.

PIM of SPAIN

at 03:50 on October 18th, 2009

To be more precise on this subject: Large government deficits choke off the very investment that we need to create jobs. In the name of doing well by the government, the unintended consequence is to make it more difficult for small businesses to start up and create jobs. And we all know that small business is the engine for job creation.

The way out of the current morass is to create jobs and increase productivity. But if the government runs deficits of $1.5 trillion that means whatever savings corporate and consumer is generated it will not go into the investments that is needed, contrary it goes into government debt.